League of Ariz. Cities and Towns v. Martin

• Decision Date: 03 February 2009
• Docket Number: No. CV-08-0379-SA.,CV-08-0379-SA.
• Parties: LEAGUE OF ARIZONA CITIES AND TOWNS, Petitioner, v. Dean MARTIN, Arizona State Treasurer, in his official capacity and Janet Napolitano, Governor of the State of Arizona, Respondents.
• Court: Arizona Supreme Court

201 P.3d 517

219 Ariz. 556

LEAGUE OF ARIZONA CITIES AND TOWNS, Petitioner, v. Dean MARTIN, Arizona State Treasurer, in his official capacity and Janet Napolitano, Governor of the State of Arizona, Respondents.

No. CV-08-0379-SA.

Supreme Court of Arizona, En Banc.

February 3, 2009.

Perkins, Coie, Brown, & Bain, P.A. by Paul F. Eckstein, Charles A. Blanchard, Steven J. Monde, Aaron S. Welling, Phoenix, Attorneys for League of Arizona Cities and Towns.

Terry Goddard, Arizona Attorney General by Mary R. O'Grady, Solicitor General, Christopher Munns, Assistant Attorney General, Phoenix, Attorneys for Dean Martin, State Treasurer.

Lewis and Roca, L.L.P. by Robert G. Schaffer, Kimberly A. Demarchi, Emily S. Cates, Stefan M. Palys, Sarah E. Selzer, Phoenix, Attorneys for Janet A. Napolitano, Governor.

BERCH, Vice Chief Justice.

¶ 1 We have been asked to decide whether a statutory measure requiring Arizona's incorporated cities and towns to deposit money into the state general fund is an appropriation that may be included in the general appropriations bill. See Ariz. Const. art. 4, pt. 2, § 20. We hold that it is not such an appropriation.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 On June 26, 2008, the Arizona Legislature passed House Bill 2209 ("HB 2209"), which is the general appropriations act for the 2008-2009 fiscal year. 2008 Ariz. Sess. Laws, ch. 285 (2d Reg.Sess.). Section 47 of the bill requires the petitioning cities and towns to pay approximately eighteen million dollars into the state general fund during the current fiscal year:

A. Notwithstanding any other law, in fiscal year 2008-2009, counties, incorporated cities and towns shall deposit $29,748,400 into the state general fund. The amount transferred to the state general fund by each county, incorporated city and town shall be calculated by the joint legislative budget committee staff, who shall publish the allocations by August 31, 2008. The joint legislative budget committee staff shall base its allocation on the distributions provided under section 28-6538, subsection A, paragraphs 2, 3, and 4, Arizona Revised Statutes.[¹]

B. Notwithstanding any other law, a county may meet any statutory funding requirements of this section from any source of county revenue designated by the county, including funds of any county wide special taxing district in which the board of supervisors serves as the board of directors.

C. Contributions made pursuant to this section are excluded from the county expenditure limitations.

Id. § 47. The Governor signed HB 2209 into law on June 27, 2008. The legislature then promptly adjourned sine die. Four days later, the 2008-2009 fiscal year began. It ends on June 30, 2009. See Ariz. Const. art. 9, § 4; Ariz.Rev.Stat. ("A.R.S.") § 35-102 (2000).

¶ 3 Two weeks after the passage of HB 2209, the League of Arizona Cities and Towns (the "League") contacted the Governor's Office to express concern over § 47's constitutionality. The League and its counsel met with the Governor's staff at least four times between August and October 2008 to discuss the dispute over § 47. When discussions failed to resolve the issue, the League filed a special action in this Court on November 14, approximately four and one-half months after HB 2209 was signed into law.² The petition named as respondents the Governor of Arizona and the Arizona State Treasurer.³ Following oral argument, we issued an order accepting jurisdiction. This opinion explains our grant of relief.

II. DISCUSSION

A. Special Action Jurisdiction

¶ 4 Our decision to accept jurisdiction of a special action is highly discretionary. Ariz. R.P. Spec. Act. 3, State Bar Committee Note; see also Forty-Seventh Legislature v. Napolitano, 213 Ariz. 482, 485, ¶ 11, 143 P.3d 1023, 1026 (2006). Several factors support our exercise of jurisdiction in this matter. The case presents novel constitutional issues of statewide importance. See Forty-Seventh Legislature, 213 Ariz. at 485, ¶ 11, 143 P.3d at 1026; Randolph v. Groscost, 195 Ariz. 423, 425, ¶ 6, 989 P.2d 751, 753 (1999). In addition, "this case involves a dispute at the highest levels of state government" and requires a swift determination because it concerns the state budget for the current fiscal year. Rios v. Symington, 172 Ariz. 3, 5, 833 P.2d 20, 22 (1992); see also State Comp. Fund v. Symington, 174 Ariz. 188, 192, 848 P.2d 273, 277 (1993) (noting that "prompt resolution is needed [in cases affecting the state budget] so that the legislative and executive branches will know where they stand and can take such action as they determine necessary relative to budgetary matters").

¶ 5 The Governor urges us to decline jurisdiction because of the League's delay in filing suit. Although the Governor frames the issue as a jurisdictional challenge, we analyze it under our laches jurisprudence because it does not implicate our authority to decide the case; rather, it relates to our exercise of discretion whether to take the case.

¶ 6 "Laches will generally bar a claim when the delay [in filing suit] is unreasonable and results in prejudice to the opposing party." Sotomayor v. Burns, 199 Ariz. 81, 83, ¶ 6, 13 P.3d 1198, 1200 (2000). Delay alone will not establish a laches defense, however. Id. at ¶ 8; Harris v. Purcell, 193 Ariz. 409, 412, ¶ 16, 973 P.2d 1166, 1169 (1998). Rather, in determining whether the delay was unreasonable, "we examine the justification for delay, including the extent of plaintiff's advance knowledge of the basis for challenge." Harris, 193 Ariz. at 412, ¶ 16, 973 P.2d at 1169. The delay must also result in prejudice, either to the opposing party or to the administration of justice, id., which may be demonstrated by showing injury or a change in position as a result of the delay. Flynn v. Rogers, 172 Ariz. 62, 66, 834 P.2d 148, 152 (1992) (citing Jerger v. Rubin, 106 Ariz. 114, 117, 471 P.2d 726, 729 (1970)); Tovrea v. Umphress, 27 Ariz.App. 513, 521, 556 P.2d 814, 822 (1976); see also Lubin v. Thomas, 213 Ariz. 496, 497, ¶ 10, 144 P.3d 510, 511 (2006) (finding prejudice to system).

¶ 7 The Governor contends that by waiting to bring its action until November, the League prevented prompt judicial resolution of the matter and exacerbated the already precarious budget situation. The League counters that the parties' ongoing negotiations justified the delay. It further maintains that no prejudice has occurred because substantial budget adjustments are still required before the end of the fiscal year to balance the State budget.

¶ 8 Section 47 requires the cities and towns to deposit roughly $18.3 million into the general fund by the end of the current fiscal year, which concludes on June 30, 2009. When the petition was filed, more than seven months remained before the League members' payments were due. Even now, nearly five months remain. Thus, while we recognize the complexities associated with balancing the budget during the course of the fiscal year, in this case, adequate time remains for the legislature to make adjustments. The time remaining before the payment deadline distinguishes this case from other cases in which we have found delays in filing suit unreasonable. Those cases often dealt with last-minute challenges to ballot propositions filed shortly before impending printing deadlines. See, e.g., Sotomayor, 199 Ariz. at 83, ¶ 7, 13 P.3d at 1200 (holding unreasonable petitioners' failure to file a special action until the day before the voter information pamphlet printing deadline); Mathieu v. Mahoney, 174 Ariz. 456, 459, 851 P.2d 81, 84 (1993) (finding unreasonable filing the complaint days before the absentee ballot printing deadline). Here, the League did not wait until an imminent deadline approached to file its special action.

¶ 9 But even had the delay been unreasonable, delay alone will not satisfy the test for laches. Sotomayor, 199 Ariz. at 83, ¶ 8, 13 P.3d at 1200. The complaining party must also prove prejudice. Id. In this case, the Governor has not demonstrated prejudice because she has not shown substantial harm caused by the League's delay. When § 47 was passed, the State's budget deficit was projected to be approximately $400 million. The anticipated deficit has steadily grown and is currently reported to be nearly $1.6 billion. JOINT LEGISLATIVE BUDGET COMM., JLBC — MONTHLY FISCAL HIGHLIGHTS: JANUARY 2009, at 1 (2009), http://www.azleg.gov/ jlbc/mfh-jan-09.pdf. Section 47 requires the cities and towns to make a payment that represents only a small fraction of the current deficit.

¶ 10 The Governor suggests that measures might have been taken to find alternate sources of revenue to replace the amount at issue here had it been known that the League would challenge § 47. Yet she knew months before the special action was filed of the League's claim that § 47 is unconstitutional. Governor Napolitano did not exercise her constitutional authority to convene an extraordinary session of the legislature to address this issue, see Ariz. Const. art. 5, § 4 (authorizing extraordinary session). Even after this action was filed, neither she nor the legislature requested a special session, see id. art. 4, pt. 2, § 1(2) (authorizing a special session upon petition of two-thirds of members of each house). If a special session was not called during that time to resolve a $1.6 billion deficit it seems unlikely one would have been called to find an alternate source for funding the $18.3 million payment at issue here. We therefore do not find that the delay in this case caused prejudice.

¶ 11 The availability of an alternative remedy also undermines the Governor's claim of prejudice. The cities and towns receive payments from the State through the Urban Revenue Sharing Fund (the "URSF"), A.R.S. § 43-206 (Supp.2008). For the current fiscal year, the legislature appropriated $727,677,400 from the general fund to the URSF. See 2006 Ariz. Sess. Laws, ch. 351, § 14 (2d Reg.Sess.).⁴ The Treasurer distributes...